With regime change in the White House, interest rates poised to remain low, and international assets looking attractive, there are a variety of arenas in which active management can bolster investor outcomes in 2021.
Performance for active managers in the ETF space has been a mixed bag, but the 3rd quarter let many active bond managers shine. For example, the intermediate product beat its core benchmark by almost a percent in just the quarter, as the fed started winding down purchases of corporate bonds that may have led to inflated prices and depressed yields in the second quarter.
“While asset managers have been facing a number of challenges including stringent regulatory scrutiny, near-zero interest rates and escalating costs; demand for new investment products at lower costs have been supporting the bottom line,” according to Zack’s Research. “Further, with heightened use of technology, asset managers have been able to enhance efficiency and operate profitably. Moreover, the rise in industry consolidation since the beginning of the year amid the pandemic is likely to offer support to investment managers’ profits.”
Will 2021 Be the Year of the Active ETF?
Many market observers are forecasting an increase in mutual fund to ETF conversions in 2021.
These new funds represent the best of both worlds’ ideas: the advantages of active management with the liquidity and tradability of ETFs, something that has long eluded the actively managed mutual fund industry.
With the dollar weak and interest rates low, fixed income could be a prime outlet for active managers to shine in 2021.
“Though active managers are striving hard over passive managers, they have recorded growth in asset classes including international small-cap equity and core fixed income. Notably, fixed income generated positive returns as investors ran for safe-haven assets due to the prevailing global growth concerns and the pandemic induced uncertainty,” adds Zack’s.
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.